Spring recovery dwarfed by Brexit anxieties - February 2019

11 min read
  • Mortgages and remortgages up
  • England & Wales' house prices rise for first time in months
  • Little cheer for the capital
  • Home ownership up overall
  • Housing Association homes overpriced for market
  • First time buyer proportions marginally up
  • Estate Agents - beware a 'knock' from HMRC!
  • Government spending on new homes and initiatives - is it enough? Is it going to the right places?
[All statistics which follow are the most recently available figures from the Land Registry and the Bank of England unless otherwise stated.]

Spring has sprung for the housing market? The best macro news for this month if anything came via the Bank of England in terms of mortgage approvals which, at 66,766, were up both month-on-month and year-on-year (the latter by a very creditable 9.1%) and similarly remortgages showed improvement, with 50,377 approvals also representing monthly and yearly comparison rises.

England and Wales had their first price rise month-on-month – just 0.3% - since August last year. Year-on-year prices continue to rise but by smaller amounts. Overall, £242,922, the average property price in England and Wales is just 4 thousandths off the £244,030 of last August, the highest ever recorded. Volumes also saw a steady month-on-month rise, to 70,510 but yearly, volumes have fallen for the 11th month in a row.

London continues to ale...

For London, as a multitude of media reports attest to, the situation is far more parlous; prices actually went up a fraction month-on-month, to £473,822 (0.1%) but continued to fall year-on-year and for nine out of the last ten months.

The average price of a home in the capital remains considerably below (3%) the £488,527 peak of July 2017. Sales volumes remain pitiful at 6,670 for October, the latest month's available figures representing the 14th consecutive month of year-on-year declines.

Foxtons, perhaps the most well-known of the capital's newer estate agents, posted a £17 million loss for the year compared to £6.5 million profits for the last year.

House building news for February 2019Slight decline in real wages

Regarding inflation, in terms of the Consumer Price Index, prices actually fell marginally between December and January, although there was a 1.8% rise year-on-year, however weekly wage rates were stagnant, meaning there were no gains of note in living standards by this comparison.

Major lender reiterates gloomy picture in the country

Prices rose just 0.4 per cent year on year compared to January's 0.1 per cent rate of growth, according to recent data published in media reports from Nationwide, one of the largest mortgage lenders.

But prices actually slumped month on month, falling 0.1 per cent from January to an average of £211,304, down from £211,966, Nationwide's house price index found.

Home ownership up

The latest English Housing Survey showed a slight rise in the home ownership rate last year to 63.5%, up from 62.6% in 2017.

However, the survey also revealed that 93% of UK homes don't meet basic accessibility standards. And house building itself is down - see below.

Older people are the new home owning class!

According to the survey, most older people are now home owners - some 76% - something which works to dispel the idea that home ownership is the preserve of the rich(er).

In fact some 67% of older people living in poverty are owner occupiers...it might be said that they are rich in bricks and mortar alone...

Even with the marginally positive signs stated, it's difficult to shake off a perception that all stakeholders in the UK housing market are bracing themselves for whatever will pan out after March 29th...and the less surety they have, then the less likely they will be to spend generally...

Housing Associations holding more than 7,000 unsold homes

According to various media reports, English housing associations have the highest number of unsold shared ownership and market sale homes on their books since quarterly surveys began in 2013, more than 7,000 in total.

It's difficult not to question pricing levels as a key reason for this...

'Empties' and under-occupancy exacerbate the housing crisis

Additionally and in parallel in terms of the complexity of the UK's housing crisis, analysis by the Cass Business School for think tank the Centre for the Study of Financial Innovation (CSFI) suggests that while the UK's housing stock is sufficient to meet current housing needs, there are a large number of second and empty homes.

Certainly there have been many estimates that there might be as much as 50,000 empty houses in the capital.

Cass Business School's Dwelling Index points to a continuing large increase in the number of older people living alone and in couples and predicts this trend is set to continue for the next two decades and with it the problem of under-occupancy and vacant housing.

Between 2020 and 2030, the number of households is set to rise by around two million to 30.7 million, but 35% of the increase will comprise older households and, of these, 61% will be one person.

The outlook is similar for 2030 to 2040, with further growth of 1.6 million in the number of households to 32.3 million with 38% of the additions forecast to be older households, and 67% of those one person. By contrast, family households are expected to grow by only 1.6% from 6.4 million to 6.5 million between 2020 and 2030 and by 0.5% between 2030 and 2040.

House building down

Housebuilding declined sharply in London and the Midlands last year as political and economic uncertainty around the shape of Brexit hit the housing market, according to industry figures.

The number of new homes in London registered by housebuilders with the National House Building Council (NHBC) in 2018 fell 10% from the previous year to 16,069, the biggest annual drop since 2016. In the east Midlands and West Midlands, registrations were also down 10%, to 13,447 and 13,087 respectively following two strong years.

The number of new homes completed rose 1% to 149,480 last year, according to the NHBC. There have been some successes also in terms of decisions to release and divert funds from central Government to local house-building projects such as for Festival Gardens in Liverpool (£10m for 1,500 homes, 600 to be affordable, first homes available in 2022).

But the figures illustrate the sheer challenge house builders face in meeting the government’s target of 300,000 new homes a year by 2023.

The NHBC's Chief Executive Steve Wood stated that unless modern methods of construction are taken up to a greater degree, it would be very difficult to reach the figure.

Modern construction you say? Read on...

Government pumps £6.5 million into research into modern housing construction methods

Innovate UK, a Governmentt innovation agency quango, has channelled £6.5 million in funding via the Industrial Strategy Challenge Fund into research into modern methods of construction to increase house building in the UK.

The consortium that is set to receive the funds, called the Advanced Industrialised Methods for the Construction of Homes (AIMCH) collaboration comprises Barratt Developments, the Construction Scotland Innovation Centre, Forster Roofing Services, housing association L&Q, the Manufacturing Technology Centre, Stewart Milne Group and Tarmac.

Barratt has a tarnished name in terms of its large association with the leasehold housing scandal and L&Q has been severely criticised for service charge rises in some of its shared ownership blocks where levels of service were found to be very poor.

The Government might consider it worthwhile to guard against accusations that it is using the housing crisis simply to funnel money into the hands of its more favoured corporations.

This is particularly the case given that Persimmon, a very large property developer, announced a record-breaking £1bn profit last year – the biggest ever made by a UK house builder and equal to more than £66,000 on every one of the homes it sold – with almost half of its house sales made through the taxpayer-funded Help to Buy scheme.

Persimmon's profits from each house it sells have nearly tripled since 2013 when Help to Buy was first introduced.

Estate Agents – beware a 'knock' from HMRC!

Unannounced inspections from HMRC in money laundering crackdown

HMRC recently conducted over 50 unannounced visits to estate agents across England last week, who were suspected of trading without being registered under the money laundering regulations. The estate agents visited were in London (35), Leicester (5), South Bucks and Berkshire (4), Greater Manchester (3), Watford (1), Wakefield (1) and Wolverhampton (1).

These visits were carried out in the first week of action involving what HMRC has publicly termed "intelligence-led, co-ordinated activity". The visits involved HMRC inspectors questioning the businesses to establish if they were in breach of the regulations with further assessment to see what action was required.

HMRC supervises more than 11,000 residential and commercial estate agents across the UK and helps these businesses protect themselves from criminals who use property sales to launder cash or finance terrorism.

Stamp duty surcharge for overseas buyers

The Government is considering imposing a 1% Stamp Duty Land Tax surcharge on anyone purchasing residential property in the UK who isn’t a UK resident and proceeds would apparently be put towards measures to tackle rough sleeping, which the Government is seeking to end by 2027.

Mayor of London launches leasehold guide for Londoners

Sadiq Khan, The Mayor of London has launched a leasehold guide for Londoners and has slammed ‘lease’ as ‘unfit for purpose’.

The portal has been created to make the process of buying a leasehold property easier to understand, with the Mayor Khan stating that his recognition that many Londoners who buy their home on a leasehold basis encounter difficulties and confusion.

NAEA Report - some good news re: first time buyer numbers, little elsewhere

The National Association of Estate Agents (NAEA), the foremost UK estate agency association, released its monthly figures (derived from its member branches) which made the following broad pronouncements.

First time buyers - some cause for cheer

The NAEA had good news in the form of an increase in the percentage of sales to first time buyers. They apparently took advantage of weakened demand, as the number of sales made to the group increased for the second month running, from 24% in December, to 26% in January. This is the highest recorded since July 2018, when 30% of sales were made to the group.

Fall in housing demand

In January the number of house hunters registered per estate agent branch fell from 304 in December, to 297 and year-on-year, demand has fallen by a fifth (19 per cent), from 367 in January 2018, as buyers hold off on making any decisions, in the light of the continuing uncertainty accompanying the current political climate.

Sales - short term marginal rise, medium term static

Sales figures increased in January, from an average of five per branch in December, to seven. This was after a dip in the last few months. However, year-on-year, the number of sales agreed per branch remained the same.

Supply falls

Supply of housing fell by 14 per cent in January, from 42 in December to 36 per member branch – this was the same figure as for January 2018.

Sadly the NAEA played down the continuance of a deeply confusing and worrying trend and something we'll continue to note: in January, some 84% of properties sold for less than asking price...is the penny dropping, even yet?

Andrew Boast, co-founder of SAM Conveyancing, said:

"It is good to see some slight signs of life return to the housing market in terms of increased mortgage approvals and even marginal price rises. However the twin bogeymen of dire sales volumes and a 'probably' Brexit coming in an as-yet-unknown shape and on an unknown date have to choke off too much optimistic forecasting however."

"The sheer and growing volume of housing market statistics now available is arguably a good thing in itself; while it keeps journalists in print it also means that those with valid points to make have more weapons in the arsenals to make them with."

"As we said last month, it's just possible that a window of opportunity might arise for would-be home buyers should whatever Brexit comes combined with a price fall make properties more affordable. This would, of course, still be dependent on both sellers and estate agents being prepared to sell."

"The Government, however, which clearly already has much on its plate should concentrate its housing resources predominantly on increasing supply and making the housing market function better for all its users; an occasional announcement of some eye-catching proposal at the drawing-board stage, while good for a short-lived soundbite, is tone deaf in the current clime."

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